Shareholders Agreement Sample India

SHAREHOLDERS AGREEMENT SAMPLE INDIA

THIS SHAREHOLDERS AGREEMENT (the "Agreement") is entered into as of this [Insert Day] day of [Insert Month], [Insert Year] (the "Effective Date"), by and among:

1. [Insert Company Name], a company incorporated under the provisions of the Companies Act, 2013, having its registered office at [Insert Registered Office Address] (hereinafter referred to as the "Company", which expression shall unless repugnant to the context include its successors and permitted assigns);

2. [Insert Founder/Promoter Name], an individual residing at [Insert Residential Address] (hereinafter referred to as the "Promoter"); and

3. [Insert Investor Name], a [company/LLP/individual] incorporated/residing at [Insert Address/Registered Office] (hereinafter referred to as the "Investor").

(The Company, the Promoter, and the Investor are hereinafter collectively referred to as the "Parties" and individually as a "Party").

WHEREAS:

A. The Company has been incorporated to carry on the business of [Insert Core Business Description] and such other commercial activities as may be permitted under its Memorandum of Association. B. As of the Effective Date, the authorized share capital of the Company is [Insert Authorized Capital Amount] divided into [Insert Number of Shares] equity shares of face value [Insert Face Value] each, and the issued, subscribed, and paid-up capital is [Insert Paid-up Capital Amount]. C. The Investor desires to make an equity investment in the Company, and the Promoter and the Company desire to issue and allot equity shares to the Investor subject to the terms and conditions set forth herein, in compliance with the Companies Act, 2013 and applicable rules framed thereunder. D. The Parties intend to define their respective rights, duties, obligations, and relationship inter se as shareholders of the Company and to provide for the orderly management and governance of the Company.

NOW, THEREFORE, in consideration of the mutual covenants, promises, and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

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SECTION 1: OPERATIONAL DEFINITIONS

1.1 "Act" means the Companies Act, 2013, read with the rules, notifications, and circulars issued thereunder, as amended from time to time.

1.2 "Affiliate" means, with respect to any specified Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with such specified Person.

1.3 "Board" or "Board of Directors" means the board of directors of the Company for the time being.

1.4 "Business Day" means a day (other than a Saturday or Sunday or a public holiday) on which scheduled commercial banks are open for normal banking business in [Insert City, e.g., Mumbai], India.

1.5 "Control" (including the terms "Controlled by" and "under common Control with") means the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

1.6 "Encumbrance" means any mortgage, pledge, lien, charge, security interest, encumbrance, option, preemptive right, right of first refusal, proxy, voting trust agreement, or restriction of any kind, whether voluntary or involuntary, affecting any property, income, or asset of any kind whatsoever.

1.7 "Fair Market Value" means the fair market value of the Shares as determined independently by a Category-I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or a Chartered Accountant holding a valid certificate of practice, utilizing internationally accepted valuation methodologies.

1.8 "Locked-in Period" means the period commencing from the Effective Date and expiring on the [Insert Number] anniversary of the Effective Date.

1.9 "Person" means any natural person, sole proprietorship, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, governmental authority, or any other entity.

1.10 "Securities" means equity shares, preference shares, debentures, bonds, warrants, options, or any other financial instruments convertible into or exchangeable for equity shares of the Company.

1.11 "Shares" means the equity shares of the Company having a face value of [Insert Face Value] each, and includes any equity shares issued pursuant to any bonus issue, stock split, reclassification, restructuring, or corporate reorganization.

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SECTION 2: SUBSTANTIVE TERMS & OBLIGATIONS

2.1 Governance and Board Composition

(a) The management and control of the Company shall vest in the Board, constituted in accordance with the Act and this Agreement. (b) The Board shall consist of a maximum of [Insert Number] directors, out of which: (i) The Promoter shall have the right to nominate [Insert Number] directors; and (ii) The Investor shall have the right to nominate [Insert Number] director(s) (the "Investor Director"), provided the Investor holds not less than [Insert Percentage]% of the paid-up equity share capital of the Company. (c) The quorum for meetings of the Board shall be [Insert Number] directors, which must include the Investor Director (unless specifically waived in writing for a particular meeting).

2.2 Affirmative Voting Rights

The Company shall not, and the Promoter shall ensure that the Company does not, take any of the following actions without the prior written consent or affirmative vote of the Investor Director: (a) Alteration of the Memorandum of Association or Articles of Association of the Company; (b) Any change in the capital structure of the Company, including the creation, issuance, or allotment of any new Securities or reduction of capital; (c) Approval of the annual business plan and operational budget of the Company; (d) Acquisition or disposal of any core assets, undertakings, or intellectual property of the Company exceeding [Insert Dollar/Rupee Amount] in value; (e) Incurrence of any financial indebtedness, borrowings, or loans exceeding [Insert Dollar/Rupee Amount] outside the ordinary course of business; (f) Appointment, removal, or remuneration revision of Key Managerial Personnel (KMP) or statutory auditors of the Company; (g) Initiation of any voluntary winding-up, liquidation, amalgamation, merger, or restructuring of the Company.

2.3 Lock-in Restrictions

(a) The Promoter shall not, directly or indirectly, sell, assign, transfer, pledge, or otherwise dispose of or create any Encumbrance over any Shares held by them during the Locked-in Period, without the prior written consent of the Investor. (b) Any transfer of Shares attempted in violation of this Clause 2.3 shall be null and void ab initio, and the Company shall not register such transfer on its register of members.

2.4 Right of First Refusal (ROFR) and Tag-Along Rights

(a) If any Party (the "Selling Shareholder") receives a bona fide, third-party offer to purchase any or all of its Shares (the "Offered Shares"), the Selling Shareholder shall first offer such Shares to the non-selling shareholders (the "Non-Selling Shareholders") in proportion to their existing shareholding ratio, by issuing a written notice specifying the price, terms, and identity of the prospective buyer. (b) The Non-Selling Shareholders shall have a period of [Insert Number] Business Days from the receipt of the ROFR notice to accept the offer to purchase all or part of the Offered Shares on the same terms and conditions. (c) If the Non-Selling Shareholders decline or fail to exercise their ROFR within the stipulated period, the Selling Shareholder may transfer the remaining Offered Shares to the third-party purchaser within [Insert Number] Business Days, provided that if the Investor is the Non-Selling Shareholder, it shall possess a Tag-Along Right to participate in such sale pro-rata on identical terms and pricing.

2.5 Information and Inspection Rights

(a) The Company shall deliver to the Investor: (i) Within [Insert Number] days of the end of each financial quarter, un-audited financial statements certified by the Chief Financial Officer; (ii) Within [Insert Number] days of the end of each financial year, audited balance sheets, profit and loss statements, and cash flow statements certified by the statutory auditors; and (iii) Annual business plans and budgets at least [Insert Number] days prior to the commencement of each financial year. (b) The Investor, its authorized representatives, and auditors shall have the right, upon reasonable prior written notice, to inspect the books of accounts, operational facilities, and records of the Company during normal business hours.

2.6 Representations and Warranties

Each Party represents and warrants to the other Parties that: (a) It has the full legal capacity, power, and authority to execute, deliver, and perform this Agreement. (b) The execution and performance of this Agreement do not violate any law, regulation, order, or contractual obligation binding upon such Party. (c) All information, disclosures, and statutory filings provided by the respective Parties are true, accurate, and complete in all material respects.

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SECTION 3: DEFAULT, TERMINATION, AND REMEDIES

3.1 Events of Default

An "Event of Default" shall occur if: (a) A Party commits a material breach of any representation, warranty, covenant, or obligation under this Agreement and fails to cure such breach within thirty (30) Business Days of receipt of written notice detailing the breach from the non-defaulting Party; (b) A Party undergoes voluntary or involuntary insolvency, bankruptcy, winding-up, or liquidation proceedings; (c) Any execution, attachment, or distress is levied against a substantial portion of the assets of the Company and is not discharged within thirty (30) days.

3.2 Consequences of Default

Upon the occurrence of an Event of Default by any Party (the "Defaulting Party"), the non-defaulting Party may, at its sole discretion, exercise any or all of the following remedies: (a) Terminate this Agreement with immediate effect by delivering written notice to the Defaulting Party; (b) Require the Defaulting Party to indemnify the non-defaulting Party for all direct losses, damages, legal costs, and expenses incurred as a result of the breach; (c) In the event of a default by the Promoter, the Investor shall have the right to exercise a "Call Option" to purchase all or part of the Shares held by the Promoter at a [Insert Discount, e.g., 20%] discount to the prevailing Fair Market Value, or at par value, as determined by the Board.

3.3 Termination

This Agreement shall terminate automatically upon: (a) The written mutual consent of all Parties; (b) The formal listing and public trading of the equity shares of the Company on a recognized stock exchange in India pursuant to an Initial Public Offering (IPO); or (c) The complete winding up, dissolution, or liquidation of the Company.

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SECTION 4: BOILERPLATE LEGAL PROVISIONS

4.1 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by any court or tribunal of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid and enforceable, and the remaining provisions of this Agreement shall remain in full force and effect.

4.2 Entire Agreement

This Agreement, along with any schedules and exhibits attached hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior discussions, negotiations, term sheets, understandings, or agreements, whether oral or written.

4.3 Force Majeure

No Party shall be liable for any failure or delay in the performance of its obligations under this Agreement if such failure or delay is caused by acts of God, war, civil unrest, natural disasters, epidemics, pandemics, or governmental restrictions amounting to force majeure, provided that the affected Party provides written notice to the other Parties within seven (7) days of the occurrence of such event and uses all commercially reasonable efforts to resume performance.

4.4 Governing Law and Jurisdiction

This Agreement shall be governed by, construed, and enforced in accordance with the laws of India. Subject to Clause 4.5, the courts located at [Insert City, e.g., New Delhi] shall have exclusive jurisdiction over all matters arising out of or relating to this Agreement.

4.5 Dispute Resolution

(a) Any dispute, controversy, or claim arising out of or relating to this Agreement, including its formation, breach, termination, or validity, shall be settled amicably through good-faith negotiations between the senior management of the disputing Parties within thirty (30) days of a written dispute notice. (b) If the dispute is not resolved amicably within such thirty (30) day period, the dispute shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996. (c) The arbitral tribunal shall consist of a sole arbitrator mutually appointed by the disputing Parties, or failing such agreement within fifteen (15) days, a panel of three (3) arbitrators (one appointed by each disputing party and the third presiding arbitrator appointed by the two appointed arbitrators). (d) The seat and venue of arbitration shall be [Insert City, e.g., Mumbai], India, and the language of the arbitration proceedings shall be English. (e) The award rendered by the arbitral tribunal shall be final, binding, and enforceable upon the Parties.

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SECTION 5: FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties hereto have caused this Shareholders Agreement to be duly executed by their respective authorized signatories as of the Effective Date first written above.

FOR AND ON BEHALF OF [Insert Company Name]

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Name: [Insert Authorized Signatory Name] Title: [Insert Title, e.g., Managing Director / Director] Date: [Insert Date]

FOR AND ON BEHALF OF [Insert Promoter Name]

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Name: [Insert Promoter Name] Title: Promoter / Shareholder Date: [Insert Date]

FOR AND ON BEHALF OF [Insert Investor Name]

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Name: [Insert Authorized Signatory Name] Title: [Insert Title, e.g., Director / Authorized Representative] Date: [Insert Date]